Defined
What Is GAP Insurance?
GAP insurance covers the shortfall between what your insurer pays if your car is written off and what you still owe on the finance. It protects you from a debt on a car you no longer have.
If your financed car is stolen or written off, your motor insurer pays its current market value — which can be less than the finance balance. GAP (Guaranteed Asset Protection) insurance bridges that gap, so you're not left paying for a car that's gone.
How GAP insurance works
GAP insurance pays the difference between your insurer's market-value payout and your outstanding finance balance, so the agreement is cleared in full. Without it, you'd cover that shortfall yourself.
The risk is biggest early on and on cars that depreciate fast, when you may owe more than the car is worth — the same trap as negative equity. Whether GAP is worth it depends on the size of the likely gap against the policy cost.
A worked example
If your insurer pays £14,000 but you still owe £17,000, GAP insurance covers the £3,000 shortfall — otherwise you'd owe it on a car you no longer have.
Worked example
Frequently asked
What does GAP insurance cover?
Do I need GAP insurance on car finance?
Is dealer GAP insurance worth it?
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